Tuesday, June 20, 2017
Quebec Can Be Successful After Independence
Let me play the Devil's Advocate and undertake an exercise that few if any sovereigntist leaders or economists would dare, that is examining what actions a government could and should undertake to assure the very best outcome.
Let's start by understanding that there are many, many loose dollars lying around and many economies to be made because quite frankly both Canada and Quebec are operated by big spenders who throw around money willy-nilly, without regard to value or necessity. Belt-tightening won't be the answer to Quebec's financial redemption after sovereignty, but with so much fat to cut, it certainly will help.
It was announced this week that Quebec is running a $4.5 billion surplus, a fantastic achievement by a federalist Quebec government determined to cut costs which paradoxically lends more credence to a viable independent Quebec.
That being said, there needs to be some considerable savings to make up the shortfall, when we consider the $15 billion that Ottawa contributes over and above what Quebec pays in federal taxes and levies, the number that seems to be bandied about by economists who presume to know.
Since Quebec is now running a $4.5 billion surplus, the shortfall becomes more manageable at $10 billion.
I write the following not as a dead accurate financial plan, but rather to expose ideas never discussed or proposed because quite frankly, sovereigntists have always been frightened to describe Quebec after independence.
Here are some thoughts which I hope readers will consider;
1. Negotiate down the portion of the national debt Quebec would inherit after independence.
In discussing the portion of federal debt that Quebec would accept, Jacques Parizeau, before the last referendum, opined that Quebec would accept up to 25% of the national debt.
That figure is nonsense, like asking a divorced couple to split up the debt evenly when, one of the couple is much poorer than the other. At any rate, Quebec would give up any claim to federal assets and be entitled to a set off in any debt assignment. Even if Canada saddles Quebec with just 15% of the national debt, both are getting a good deal, considering that Quebec is a drain on Canadian finances to the tune of $15 billion a year.
Today Quebec contributes about 18-20% of the federal budget (with a population of 23% of Canada) meaning that it pays about $5 billion of the $26 billion Ottawa spends on servicing the federal debt. Should Quebec be successful in accepting just 15% of the federal debt on separation, it would mean an annual saving of a little over $1 billion.
2.Create it's own currency
There's been a lot of discussion about keeping the Canadian dollar as legal tender in an independent Quebec, mostly to calm fears of the unknown, but the idea of having the Queen of Canada gracing the money in an independent Quebec is ludicrous. First of all, removing Canadian dollars from circulation would create a $10 billion one-time-windfall as new money printed is exchanged for Canadian dollars. Secondly, a floating Quebec dollar would reflect reality and should the currency exchange fall vis-a-vis the American and Canadian dollar, it would effectively devalue the cost of labour, something that could make Quebec more competitive, but citizens admittedly poorer. Remember those discussions of 'Dutch Disease,' and it's supposed impact on Canadian competitiveness?
3.Get rid of the armed forces
Part of reducing the Quebec portion of the federal debt is to relinquish Quebec's part of federal assets and nothing fits the bill better than the armed forces. Getting rid of the armed forces would save Quebec four to six billion dollars a year, putting a huge dent in the budgetary shortfall. Quebec could create a small coastal defence force consisting of small littoral patrol boats along with helicopters for search and rescue and coastal sovereignty enforcement, costing peanuts. Dreams of NATO membership and international interventions aren't something most Quebec need or in fact want. This new coastal defence force could be based in the Gaspé, with an important outpost in the Îles de la Madeleine , thus creating permanent employment for regions that will be highly impacted by the loss of federal unemployment insurance payments. As for defence of the realm, Quebec could enter into a defence pact with the United States whereby the United States Armed forces could be provided with a permanent base (like the Philippines) at the mouth of the northwest passage in exchange for providing air cover as a deterrence. The USA would jump at such a chance to extend their military reach.
4.Revamp the Educational system and get rid of CEGEPS
Sovereignty should be an opportunity to revamp the educational system starting with the elimination of the CEGEP system which has proved to be an abject failure. High school would be extended by a year, thus returning Quebec to the tried and true North American model. It's been a policy of the Quebec government to try and improve graduation rates to mimic those in the rest of Canada, but lowering standards to encourage enrolment hasn't worked, a costly disaster that has post high school non-achievers lounging in CEGEP for a couple of years before failing out. Universities could easily make up the extra year as enrolment in most French universities is way below capacity. By streamlining the system and raising standards, Quebec could graduate as many students as today with 20% less enrolment, a windfall that could actually pay for free post-secondary education. While tuition could be free for those who take school seriously, layabouts who flunk or drop classes would be required to pay a hefty price for failure, thus encouraging serious students only. One English university would have to close to reflect the outflow of Anglophones, but McGill should remain a pearl, even in an independent Quebec, providing higher education for both French and English students of exceptional ability.
5.Spread the wealth of government jobs
While Quebec would save an enormous amount of cash after independence because it would no longer send Ottawa taxes and remittances, the services provided by Ottawa like healthcare and defence would have to be provided by Quebec and those new services should be implemented so as to better balance out government employment across the province, especially in depressed regions. I am reminded of a visit to Bathurst New Brunswick where I discovered a federal government office making social security cards for the entire country, providing employment in a depressed market.
Those new Quebec government agencies and offices created by Ottawa's withdrawal should be opened in areas that are depressed or otherwise losing federal agencies like Revenue Canada regional offices in Jonquiere and Shawinigan. It doesn't take a lot of government jobs to boost the Gaspé region and other depressed areas which already suffer from massive underemployment. Spreading out government jobs would provide meaningful non busy-work and eliminate stupid make-work programs like cement plants or wind technology manufacturing.
5. Eliminate wasteful busy-work projects
Quebec has mothballed several hydro-electric generating plants because of the lack of demand, while creating make-work jobs in wind generation and co-generation power that cost three to four times more than the closed plants. All wind farms and co-generation plants should be phased out and the technologies abandoned. The re-opening of mothballed hydro power plants would save Quebec over a billion dollars a year. The jobs lost would be compensated with good paying government jobs as described above.
Even with those measures, Quebec would remain with an over-abundance of electricity due to competition, conservation and cheap gas prices. Measures should be made to increase electricity use in the public domain and perhaps all new residential homes constructed would be required to install electric heating only. While electric cars remain a pipe dream, other public uses of this Quebec resource could be raised as a priority. Even if electricity costs more to use than oil, it's use would be beneficial in the long run considering the spin-off effects.
Think of it like supporting your neighbourhood bakery which employs locals and purchases local raw materials. Even if the cost of the products is slightly more than buying from foreign sources the local economic benefits far exceeding the added price.
6. Temporarily suspend foreign aid
Canada is already a skinflint when it comes to foreign aid, but still spends about $5.7 billion dollars, of which Quebec taxpayers contribute over one billion dollars. A temporary moratorium would help Quebec achieve its goal of financial independence..
7. Review entitlements
Certainly nobody agrees that wealthy Quebecers should be entitled to government subsidized daycare and so an independent Quebec should take the opportunity to revamp all the entitlement programs that includes universality, the idea that subsidized programs are open to all Quebecers, even the rich.
8. Renounce pensions to those who abandon Quebec or Quebec citizenship.
Here's certainly a novel idea that would financially punish those who abandon the new state. Those who give up Quebec citizenship and move to Canada or parts unknown would no longer be entitled to a Quebec government old age pension. It's a bit harsh, but it will have many thinking twice about leaving and the savings on those who do would be considerable.
Now all the above measure would amount to more than the $10 billion required to balance the budget and so amazingly, you'll notice that I haven't even proposed any tax increases which could be left as an ace in the hole should circumstances deteriorate.
The biggest hindrance to sovereignty is not political, but rather economic. If sovereigntists can cobble together a reasonable plan of financial independence, the road towards independence finally becomes realizable.
Posted by Philip Berlach on 6/20/2017 04:08:00 PM